All submissions must be your own, original work and you must show all calculations and/or provide explanations.
Use data from the following table to answer questions 1, 2, and 3.
|
Option Quote
|
|
|
Call
|
Put
|
|
Expiration
|
Strike
|
Last
|
Volume
|
Open Interest
|
Last
|
Volume
|
Open Interest
|
|
Jan
|
190
|
4.40
|
815
|
5697
|
1.75
|
507
|
2496
|
|
Feb
|
190
|
6.75
|
402
|
2808
|
3.00
|
3553
|
10377
|
|
Apr
|
190
|
8.85
|
107
|
1866
|
5.20
|
527
|
2177
|
|
Jul
|
190
|
10.95
|
15
|
645
|
8.54
|
6
|
1142
|
|
Jan
|
195
|
0.01
|
2451
|
11718
|
0.70
|
4090
|
8862
|
|
Feb
|
195
|
3.65
|
1337
|
11902
|
5.00
|
860
|
3156
|
|
Apr
|
195
|
5.90
|
1785
|
2928
|
7.30
|
934
|
1141
|
|
Jul
|
195
|
8.45
|
13
|
5773
|
10.85
|
22
|
3419
|
|
Jan
|
200
|
1.10
|
1248
|
2966
|
5.55
|
637
|
6199
|
|
Feb
|
200
|
1.61
|
1053
|
5530
|
8.09
|
546
|
967
|
|
Apr
|
200
|
3.70
|
629
|
3236
|
10.05
|
375
|
1903
|
|
Jul
|
200
|
6.10
|
80
|
1257
|
--
|
--
|
1105
|
Any calculations should be done in Excel® and pasted into the Word® document using the "Paste Special-Excel Worksheet Object" feature.
This will allow the instructor to double click on your work to see the formulas and calculations you used to answer the selected problems
1. Calculate the payoff and profit at expiration for the February 190 calls, if you purchase the option at the stated price and at expiration the stock price is $195.
2. Calculate the payoff and profit at expiration for the February 195 puts,if you purchase the option at the stated price and at expiration the stock price is $195.
3. Calculate the payoff and profit at expiration for the February 200 calls, if you purchase the option at the stated price and at expiration the stock price is $203.
4. On January 1, the listed spot and futures prices of a Treasury bond were 93.8 and 93.13. You purchased $100,000 par value Treasury bonds and sold one Treasury bond futures contract, also $100,000 face value. One month later, the listed spot price and futures prices were 94 and 94.09, respectively. Determine the change in the value of your combined position.
5. The risk-free rates in the United States and in the United Kingdom are 4% and 6%, respectively. The spot exchange rate between the dollar and the pound is $1.60/BP. Based on the current spot exchange rate and interest rates in the U.S. and UK, determine the appropriate 1-year futures rate.
6. a. You have an asset that produces quarterly fixed cash inflows of $10,000, but you anticipate rising interest rates. Explain how you could enter a swap contract to take advantage of rising rates, and increased cash flows, without selling the asset and investing in a higher-paying asset. Diagram the swap, including the notional principal and payments, assuming a swap fixed rate of 4%.
b. Over the first quarter the swap is in force, the floating rate (LIBOR) rises to 4.1%. List the size and direction of all three cash flows to the swap.